UK Commercial Property REIT (UKCM) said the UK commercial real estate market was showing signs of stabilisation after the REIT reported “marginal valuation increases” in the first quarter of 2023.
In Q1, UKCM said it had enjoyed a 0.9% increase in like-for-like portfolio capital value (net of capital expenditure) to £1.32bn, which compared favourably with the MSCI UK Monthly Property Index where capital values fell by -1.2% over the quarter.
It had an unaudited NAV per share of 80.6p (31 December 2022: 79.7p) a NAV increase of 1.1% and a NAV total return for the quarter of 2.2% (Q4: -20.8%). The REIT said it had maintained its dividend at 0.85p per share for the first quarter payable 31 May.
Ken McCullagh, chair of UKCM, said: “After a rerating of the UK commercial real estate sector in the final quarter of last year, as a result of a dramatic increase in interest rates as governments tried to stem inflation, there has been a period of stabilisation in the first quarter of 2023. During the period, the company has continued its asset management initiatives to drive earnings.
“These factors have led to a marginal increase in the value of UK Commercial Property REIT’s high-quality, diversified portfolio, which is also reflected in the small increase to NAV. I am also encouraged by the continued strong operational performance across the portfolio which has benefited from high occupancy, strong demand led leasing momentum and, in turn, rental growth.
“The company’s balance sheet remains robust with low leverage and ample resources to complete our development pipeline. While we remain aware of the uncertainty that still prevails in the market, this more positive broader outlook and the company’s healthy first quarter performance gives us further confidence about the future prospects for the company.”
Will Fulton, lead manager of UKCM at abrdn, added: “During the first quarter of the year we have continued to see strong occupational demand for the limited amount of space we have available to let across our portfolio, allowing us to maintain high occupancy at 98% and capture significant reversion.
“While our industrial assets were the biggest driver of rental growth, encouragingly we saw positive leasing activity and uplifts at renewal across our office and retail warehouse assets as well. The final phase of our student accommodation development completed during the period, with a rent guarantee for the first year and bookings already strong for the next academic year.
“Our development pipeline will add further rent as the new properties come on line in the months ahead. With valuations having stabilised during the quarter, we are starting to see anecdotal evidence that the investment markets are beginning to open up which should help provide further confidence to the market.”
